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FCA proposes greater transparency on diversity targets for listed companies

Posted on 1 September 2021

The Financial Conduct Authority (FCA) is consulting on changes to its Listing Rules relating to transparency of diversity on listed company boards and their executive committees. The proposed changes would require a listed company to publish annually a 'comply or explain' statement on whether it has achieved certain diversity targets for gender and ethnic minority representation, in addition to data on the gender and ethnic make-up of its board and most senior level of executive management.

The FCA is also proposing to change its Disclosure and Transparency rules, which already require certain listed companies to disclose in their corporate governance statement the diversity policy applied to their board (where such a policy is applied), or to explain where no such diversity policy is applied. The changes will require companies, in those disclosures, to address key board committees and broader aspects of diversity. This could include, for example, considerations of ethnicity, sexual orientation, disability, lower socio-economic background and other diversity characteristics. The FCA also encourages companies to provide further data on the result of their diversity policies considering these wider aspects where possible.

The consultation, which launched at the end of July 2021, is a welcome indication of the FCA's commitment to diversity. It follows a series of Government-backed reports on the topic, including the February 2021 publication of the Hampton-Alexander Review on the representation of women in senior leadership positions – see Women on boards - the final Hampton-Alexander report - and the latest March 2021 report by the Parker Review committee, an independent review into the ethnic diversity of UK boards.

The proposed changes also follow a recent FCA discussion paper published in July 2021, which explored the promotion of diversity and inclusivity across the financial services sector as a whole (see FCA reflections - diversity and inclusion a regulatory matter). The FCA has stated that implementation of the current proposals would aim to build on and advance the progress made by existing measures to improve diversity of UK companies' boards. The ambition is that publication of the 'comply or explain' statement and diversity information would help to foster a standardised approach to diversity reports on company boards, particularly those outside the FTSE 350 companies, which do not presently provide data to the voluntary initiatives in this area. The FCA acknowledges that there are data protection issues with collating such diversity data, which companies who are currently unfamiliar with such diversity initiatives will need to manage.

It is important to note that the proposed Listing Rules' diversity targets are not mandatory requirements for companies to meet. In its press release, the FCA stressed that it was not setting 'quotas' for companies by its new proposals, but rather providing a 'positive benchmark' for issuers to report against.

With regard to the specifics of the proposals, FCA has stated that the ‘comply or explain’ statement targets are as follows:

  • At least 40% of the board should be women (including those self-identifying as women).
  • At least one of the senior board positions (Chair, Chief Executive Officer (CEO), Chief Financial Officer (CFO) or Senior Independent Director (SID) should be a woman (including individuals that self-identify as a woman).
  • At least one member of the board should be from a non-White ethnic minority background (as defined by the Office for National Statistics).


In the context of public policy and wider social concerns, coupled with growing interest from investors and an increased focus on ESG investing from companies, the FCA's proposed changes signify an important measure to increase transparency on the diversity of companies' boards and executive committees, which would hopefully result in further progress being made in this area.

However, the consultation remains ongoing, and the proposed initiatives remain subject to feedback and FCA Board approval. The process is expected to last for a total 12 weeks, ending on 22 October 2021; if approved, the FCA will seek to implement the changes for accounting periods commencing on or after 1 January 2022.

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